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Bad Weather Rising

An agricultural economist at the University of Illinois is looking for a long-term recovery in the commodity markets. Commodity prices have been low since 2014, but the price of farmland has remained fairly strong. This is an indication thinks University of Illinois’ Scott Irwin that those buying farmland believe his contrarian view that prices will recover say to $4.00 for corn, $10.75 for soybeans, and $4.75 for all wheat. That’s at least one way to reconcile the firmness of land values. These long-run investors, whether they be farmers or outside investors, are looking for higher averages to restore profitability.

Irwin says there are two reasons for commodity prices to increase. One of them is slow. It’s the return of better economic conditions across the planet. The other he says is fast and violent, “I think it will be a series, in a fairly short period of time, of really poor weather that will be the big event that pulls us out.”

The ag economist is looking for the return of a more normal frequency of bad weather in the United States. Noting that the last twenty-plus years have been the best series in terms of corn belt weather since 1895.

What Is Up with Soybean Yields

read farmdocDaily arcticle
by Scott Irwin, Agricultural Economist - University of Illinois

Soybean yields in the U.S. have been very high the last four years. The U.S. average yield set new records in a stair-step fashion each year between 2014 and 2016. The 2016 yield reached the remarkable level of 52.1 bushels. While not a record, the 2017 yield (based on the November 1 USDA estimate) was 49.5 bushels, the second largest ever. On top of the high U.S. average yields are the numerous reports of field-level yields in the 70s, 80s, and even a few in the 90s.





The high soybean yields of recent years have sparked a debate about what is driving the exceptional yields. In thinking about this debate it is important to understand that there are only three possible sources of soybean yield gain. The first is weather during the growing season. The second is genetic improvement in soybean varieties. The third is a management, which encompasses all aspects of the soybean production process. Genetic improvement and management sometimes go hand-in-hand so that one requires the other.

It is a not an easy task to disentangle the complex and sometimes interacting impacts of weather, genetics, and management on soybean yields. One approach is to use a crop weather regression model to estimate the separate impacts of weather and technology on soybean yield, where technology is the combined impact of genetic improvement and management. I estimated this type of model for U.S. average soybean yields over 1970–2017. A linear time trend was used to represent technological change and summer precipitation and temperature variables were used to represent growing season weather. The modeling results showed that U.S. average soybean yields in 2014, 2015, and 2017 could be explained by a continuation of the linear improvement in technology and good growing season weather. The exception was 2016, when yield was substantially higher than what could be predicted based on a linear technology trend and good weather. It is not clear from this exercise whether we should view the 2016 yield like a 100-year flood or a permanent jump in soybean yield potential.

Agronomic data can be helpful in further disentangling genetic improvement from other sources of soybean yield gain. One recent study collected seed for over 150 soybean varieties released from the 1920s through the 2000s. Using randomized trials from across the country in 2010 and 2011, the study estimated “pure” genetic improvement in soybean yields. The results indicated a linear progression of soybean genetic yield gain from 1970 through 2008. This indicates that the historical pattern of soybean genetic gains in yield have been steady and marked jumps in the rate of improvement are rare. Soybean variety test results from the Department of Crop Sciences at the
University of Illinois provide relevant data through 2017. The yield of conventional soybean varieties relative to the older Williams variety shows no change of trend in recent years. Overall, there is little evidence to date that soybean genetics have been improving at a faster rate in recent years.

If we dig into the soybean yield data for the U.S. state-by-state an interesting pattern emerges that points to important changes in management practices. In general, soybean trend yields in the Southeastern U.S. have been growing at a much faster rate than in other growing regions. This non-linear trend appears to be related to a number of management practices, which can be roughly described as having the purpose of replicating Midwestern growing conditions. This includes planting much earlier in the past, planting earlier maturing indeterminate varieties, including corn in the crop rotation to increase organic matter in the soil, and using raised bed production systems. These management practices have allowed soybean yields in the Southeast to largely catch up with those in the rest of the country.

In sum, the data indicate that the biggest factor explaining high soybean yields in recent years is simply exceptionally good growing season weather. Improved management practices, particular in the Southeastern U.S., have also certainly contributed. A jump in the rate of genetic improvement in soybeans was not likely a big contributor to the surge in soybean yields.

Soybean Stocks, Acreage, and Weather

The price of soybeans has rallied so much this season that one agricultural economist is doubtful there is much additional upside potential.

New crop soybeans are worth about two-and-half dollars more today than back in February when farmers purchased insurance to cover the price risk inherent in farming. The rise has to do with a short crop from South America, above average temperatures in the United States, and only scattered rainfall in the mid-section of the nation. Farmers can now sell beans for about $11 a bushel for fall delivery, and that doesn’t seem too bad to University of Illinois agricultural economist Darrel Good.

Quote Summary - While there is a potential for prices to move even higher with stressful summer weather, that potential may be less than the potential for corn, depending on the magnitude of planted acres, since soybean prices have already experienced a sharp rally and soybean yields are less sensitive to summer weather than are corn yields.

The path soybeans have taken to higher prices is pretty clear. The July contract at the CME Group in Chicago is up 25% since April 1, 2016. The rally came as the market came to grips with a 200 million bushel reduction in the estimated size of the combined Argentine and Brazilian soybean crops and the resulting surge in export demand for U.S. soybeans. The next stop on this price train forward is the end of month reports from the United States Department of Agriculture. USDA will release the Acreage and Grain Stocks reports June 30th. Darrel Good calculates the expected June 1 Grain Stocks for soybeans near 842 million bushels.


Soybean Inventory Estimate
(in billion bushels)

1.531 March 1, 2016 Inventory
+ .006 Imports
- .173 Exports
- .487 Crush
- .035 Feed & Residual

0.842 June 1, 2016 Inventory


He believes there is room for a surprise in the Acreage Report. USDA’s survey of farmers in March put expectations at 82.236 million acres. This number could be higher for a couple of reasons. The consensus seems to be that the June Acreage report will reveal that acreage exceeded intentions due to some switching of intended corn acreage to soybeans as the result of the increase in soybean prices relative to corn prices since March and the delayed corn planting in parts of the eastern Corn Belt.

Soybean acreage may also exceed intentions, writes Darrel Good on the FarmDocDaily website, as a result of total acreage of spring planted crops exceeding intentions reported in March.

Corn Prices to Reflect Summer Wx & Demand Strength

Summer has arrived and so has the critical three month period in which the nation’s food supply will be established. The commodity markets will follow weather conditions, crop ratings, and weather forecasts in order to form yield expectations. Todd Gleason reports the starting place is typically to assume a normal growing season.

Implications of Corn and Soybean Planting Progress

Each Monday afternoon during the growing season USDA releases the Planting Progress report. Todd Gleason files this report on how it is assessed by the trade; and how really it is summer weather that make the difference, not the pace of planting.

Notes from the Illinois Soybean Summit | Rockford Edition

This morning, March 11th, DTN Progressive Farmer meteorologist Bryce Anderson told farmers at the Illinois Soybean Summit weather would cap this year’s potential yields. Todd Gleason is emceeing the event, and asked Anderson if he means it is unlikely for yields to be better than USDA’s trendline.

The Senior Grains Analyst for Farm Futures Magazine was also at the summit. Bryce Knorr told the group to reward market rallies.

The Illinois Soybean Summit took place Friday March 11, 2016 in Rockford.

A Weather Market for Corn in 2016

Nearby corn futures remain above the early January lows, but continue to struggle under the weight of a number of negative market fundamental factors. Todd Gleason has more on the prospects for higher corn prices later this year.

tStorm's Midwest Summer 2016 Weather Prospects